Shifting Mileage Programs to Accommodate the Work-From-Anywhere Lifestyle

Many employees are leaning into the work-from-anywhere lifestyle and organizations are shifting to accommodate these new and evolving expectations. Designing a winning mileage program that is fair, comprehensive, and relevant to the times is no simple feat. Since mileage is a top area of spend for many organizations, how they handle the policies, tracking, reimbursement, and feedback can be instrumental for budget planning, as well as validating employees who travel long or short distances for work.

Enjoy this candid and practical SAP Concur Conversation on optimizing mileage spend amidst and beyond the pandemic between Marchelle Klippenstein, Vice President of the Value Experience Group at SAP Concur solutions, and Ken Robinson, Market Research Manager for Motus.

You can listen to this episode on Apple Amazon Spotify Listen Notes Acast or your favorite podcast player.

Transcript:

Marchelle Klippenstein:

Well hello, Ken Robinson. How are you today?

Ken Robinson:

I'm doing fantastic, Marchelle. How about yourself?

Marchelle Klippenstein:

I'm good, I'm good. And hello to the listeners today. We have Ken Robinson from our Motus partner with us today, and I'll give him room to introduce himself, but first I'd like to introduce myself. I am Marchelle Klippenstein. I'm the vice president of our Value Experience Group at SAP Concur [solutions] and I have the pleasure of speaking with Ken on the topic of mileage. It seems like a no-brainer in a lot of ways, but we know that it's a pressing concern or there's a lot of questions around what's next when it comes to employee mobility. So, Ken, you want to introduce yourself to the audience?

Ken Robinson:

Absolutely. I'm Ken Robinson, the Manager of Market research for Motus. That basically means that I spend a lot of time researching trends and different cost influencers that affect all types of mobility expense.

Marchelle Klippenstein:

And Motus is a huge partner for us in terms of employee expense management, so we're just ... Again, thank you for being with me here today. We'll kick things off. First of all, you mentioned just before we started recording that you're from Milwaukee and that the sun is shining for you today, which is great. We're on the precipice of summer, which is awesome, and of course employees are going to get out and start moving around. We've got a world that's opening up, right? So, we'll just first kind of launch into what's your perspective of the mobile workforce and what is the personal car mileage or the vehicle transportation environment looking like right now?

Ken Robinson:

Well, so overall mileage levels have gradually been increasing and I would expect that especially over the next say one to one and a half quarters we're going to see an additional surge in terms of the number of miles that people are driving both for business purposes and for personal purposes. One of the things that is really the perspective inside and really outside of Motus is that we have to really think about the rise of the work anywhere lifestyle. So if you think about obviously we're all familiar with working from home and decentralized approach to work, but the way that we do business has changed in a way that I don't think is ever going to revert back to the way that things were say a little more than a year ago, because it's unlikely that people are headed back to the office.

Ken Robinson:

And that's what different experts inside of commercial real estate would tell you also is that it's not that we're going to get rid of the office, okay, but it's that now that we have found ways to work effectively in a remote environment ... In my mind it's a split of maybe I'm going to spend some time in the office, but I'm probably also going to be spending time remotely, and that might mean working at the home office, but it might also mean that I'm going to be working out of the car, going to see customers, right? I think that we're going to see more of that work without boundaries approach, to the way that people operate.

Ken Robinson:

And so it sure seems likely that business mileage is going to increase not just over the suppressed levels that we've seen over the past 12 months, but I think that going forward that business mileage almost ... It has to increase and especially in the short term when air travel for business purposes might take a little longer to recover. It also seems like the car is a real natural opportunity to get out and make those business trips, right?

Marchelle Klippenstein:

Right, which is going to introduce ... Again, it goes back to the mobile workforce people are going to want to. I mean, let's be honest. People are going to want to get out of their homes. Us having this dialogue over a podcast, it's probably much more fun to be sitting across from each other in a room with a microphone and having it there, right? People are going to want to do that. Our customers should be seeing employees raising their hands most likely to say, "Hey, you know what? I want to get out. I feel safe. I want to go see a customer. I want to go do this. I need to do business on behalf of this organization. I want to make things happen. I want to generate revenue. I want to be part of the solution." And I think our customers are going to have to be ready for that return. But here's the thing though. I saw the other day, I think for '21, right, IRS changed some mileage reimbursement rates and companies are having to pivot quickly to different mobile options. Maybe some are going more personal car than they're going fleet or whatever.

Marchelle Klippenstein:

So I think the IRS reduced the rate, right? It dropped a penny or something for the US market. I think it was 56 cents a mile or something. It changed, I know that, but the thing is why? Why would the IRS say, "Okay, sorry, you're coming out of a pandemic, and this would be our primary mode of transportation for you? We know that air carriers are not going to be your primary choice, potentially." Why would the IRS or what is the situation behind the mileage reimbursement rates and what do our customers need to consider with that?

Ken Robinson:

It's a very deep ranging topic, Marchelle. What I will say is that ... So the rate went down and it's because the IRS mileage standard, it's really based on the prior year versus what you see happening. And so you think about all the different driving costs. For example, one that we're all super familiar with is gas prices, right? And gas prices, are they ever the same between stops at a fuel station? Probably not. And so what I would say is that it can be a little bit of a headache depending on how accurate a company wants to be when you stick to that standardized one size fits all rate because, again, it's based on last year. So last year gas prices were very depressed. Just like almost everything else in the economy, things were way out of whack with fuel prices. And so now employees, when they receive that per mile reimbursement it's not really reflecting their actual cost. It's reflecting the prior year's costs.

Marchelle Klippenstein:

Okay, okay, so let's dive into that a little bit more. I'm sure everyone's thinking, well, yeah, I'm not getting reimbursed enough to cover the cost of my car or my insurance. So how would anybody on the finance side of a business respond back to an employee that says, "You're not even covering the cost of my car. Give me a car or give me an allowance or ... What's the balance there or how should our customers jointly respond to their [inaudible 00:06:40] on that?

Ken Robinson:

Well, I think that it's a fair question for employees to raise and in what I think is an important, maybe introspective moment for employers is to think about the way that they're doing things. And if you think about the landscape, I think that more than a few departments inside of every business have been taking time and are taking time to think about how they might want to do things better going forward. And so it's a good time to look at different options for vehicle programs too, because that IRS one size fits all mileage standard is not the only option. And so for example, companies could pay a vehicle allowance, a fixed stipend essentially to cover that driving expense. And the problem is when we're talking about accuracy, that's really not helping either, is it?

Marchelle Klippenstein:

No.

Ken Robinson:

For example, the gas price that I pay is going to be very different than the one that you pay just because of our geography, not to mention the point in time, right? When is the business being done? And so that's one of the things that's really interesting about the fixed and variable rate approach or FAVR as we call it. And it's because that method uses a more contemporary or I guess more current view on all the different cost factors. So especially with gas prices, that FAVR reimbursement is going to be extremely accurate in terms of what people are paid for that fuel portion of their driving costs.

Ken Robinson:

It's not just going to be accurate in terms of where prices are in the market right now, it's also going to be accurate in terms of where you're located. And so that's one of the reasons that FAVR is an attractive option because it's super accurate, and it's a very fair approach, and it's actually ... Strangely enough, inside of the IRS tax regulations there's information on what it takes to pay a tax-free mileage reimbursement and FAVR is outlined there is the method that's really optimal, even though a cents per mile approach could be applied and people can just log mileage.

Marchelle Klippenstein:

Right. You bring up a good point. I think I've seen a couple of states that have been or a couple of companies that have been targeted in their state legislation that actually almost ... Doesn't it guide companies to say, "Hey, you need to look at FAVR as a dominant reimbursement method," or because of the imbalance? You're mentioning the price of fuel is going to be more expensive in some of the coastal states, or the cost of insurance, or doesn't it matter the size or the type of car the employee has? If we're dependent on the employees to drive their own vehicles to do business on behalf of us, don't we need to consider that as a ... To your point, it's a non-taxable reimbursement for them using their own asset. Isn't there regulation that goes along with this to your point with the IRS tax code?

Ken Robinson:

Yes. There is really a slew of rules and regulations that need to be navigated and that's one of the things that Motus has done a great job of simplifying through technology is to create a compliance solution, and I would say is one of the reasons that we're partners, right, is that our combined solution is the best of both worlds. The other upside of FAVR is that it's not just fair and accurate. I guess accuracy also leads the way towards I would say really effective cost control, because you don't want to overpay or underpay and that's, I guess, one of the weaknesses of using that one size fits all approach of say 56 cents a mile is that if you and I both drive say 6,000 business miles a year and we're in our areas, say we have sales territories and we're driving our two territories. At the end of the day we're going to get about the same amount of reimbursement paid to us.

Ken Robinson:

But if my costs, for example, for insurance, and taxes, and registration, and fuel and maintenance, everything that goes into the cost of driving, not to mention the car itself, that stuff is all scaled at a lower cost of living where I am and a higher cost of living where you are. We're creating sort of winners and losers, right?

Marchelle Klippenstein:

Right.

Ken Robinson:

Because if we're being paid the same amount there's a good chance that I'm being paid more with that flat rate than I actually need to cover my business mileage and you might be getting paid less. It's not a great approach, and so if there's a way that's not too painful that can help even the scale out so that we're each paid effectively it's probably the best answer for everyone. That's the thing is that it's a cost of doing business and sometimes people will view these things as a perk.

Marchelle Klippenstein:

That's true, they do. They think, "Oh okay, well I'm going to drive here and there and I'll get paid more than it costs me to drive there," but really they're not thinking about it in the larger, like the bucket of money that goes into mobilizing the workforce. So that actually brings me back. You mentioned it earlier, you talked about governing spend and it being probably a significant dollar amount for a lot of our customers, right? So I'm just curious off the top of your head, do you have an idea of the average or the norm as a percentage of total expense activity that mileage really does ... Is it 5%? Is it 10% of someone's program or is it kind of all over the board?

Ken Robinson:

I think it varies because of the nature of people's businesses, right? So if you have more of a hard goods type of business and you have a lot of merchandisers, for example, that can be a very large cohort of people that are driving for business that can kind of shift the scales. I would say that ... Actually, a study that [SAP] Concur [Solutions] did a couple of years ago, cites business mileage as a top 10 expense category for a large number of industries. If you're in the top 10, it probably deserves some scrutiny. Wouldn't you agree?

Marchelle Klippenstein:

I agree, yes. So in the Value Experience Group, when we are working with customers we do see mileage hit the top of the list nine times out of 10, right? And often I think the customers we're talking to do not have ... They could talk to us all day about how they curb airfare expenses, and their tactics with that, and their suppliers, and then hotel and they negotiate everything. But never have, well, not never have I ever but most of the time I've not heard a program manager come to us and say, "This is how I need to curb or manage this category, which is mileage."

Marchelle Klippenstein:

And I think that given this, like you'd mentioned, the trajectory of where we're at, you're right, this is a really great time for our programs or our customers to look at this piece of their program and say, "What's best?" So question for you on that front. I mean, are you seeing customers drive or move towards fleet vehicles or getting out of the business of personal car and maybe moving towards fleet? What's the temperament or the sentiment in the market on that?

Ken Robinson:

We see a lot of companies looking at getting out of the company car business or fleet car program and a big part of that is that, well, it kind of relates back to COVID in that especially during that initial couple months where all public activity was really flat those businesses were paying for the cars, and so we've got this idle asset that's sitting there. So they might be saving on some of the consumable costs like their fuel, but at the same time that asset owned by the company is sitting there. It's not helping them do anything.

Ken Robinson:

And then because the vehicles oftentimes weren't even being driven for several months now they incur additional maintenance costs. And so there are two ways to look at the aspect of a fleet vehicle versus a personal vehicle for business and with a fleet vehicle the company is always going to pay more because even with the mechanisms that are in place to offset aspects of personal use there's always some personal use that seems to get through.

Marchelle Klippenstein:

I was going to ask about that.

Ken Robinson:

Right. Whereas a personal vehicle, the philosophy there is that people are being reimbursed for the amount of that asset that's being used up for a specific business activity. And then depending on how granular you want to approach that, that kind of guides companies approaches. But then there are other things to think about that happened in terms of say employee satisfaction, because if I'm getting a company car I probably don't have a huge variance in terms of choices of what type of vehicle I'm getting. And that type of vehicle might be perfect for my company to have me take clients out to lunch, for example, but when it comes to my whole life, right? And so that's another thing that I was thinking about the other day actually is that the lines between work and life are blurry.

Marchelle Klippenstein:

So blurry, it's so blurry. I've got a teenager, I know.

Ken Robinson:

Yeah, and so now, for example, it's probably 10 times more blurry or it's something like that. And so for example, if you don't have a vehicle that's going to work with your lifestyle, right? You don't want to be out driving around in your company car doing your business, and then maybe you need to pick the kids up to go to soccer practice and where do you put all the gear? And so if it's a sedan you might be running out of room really quickly and you might need that SUV or whatever it takes to manage your life along with your business. And so that's where this aspect of personal choice comes in and I think that that's another ... It's another upside that people get, right? They have the freedom to choose that vehicle that's going to best mesh with their lifestyle and then still be barely reimbursed for their business expense portion of that as they deal with the business portion of their life.

Marchelle Klippenstein:

Right. Well, and that's what you said earlier in the beginning of even our time together. You said it, the rise of work from anywhere, right? And so that applies to the type of vehicle that people need to drive. Like I said, I have a teenager, but he's almost 17 so I don't have to drive him anymore. But I look back 10 years, I would've had the soccer gear. I would've had carpooling responsibilities. I would've had all that, right? And now if I was locked into a fleet program with a car that didn't serve that lifestyle I would've had to drive home, get my other car, go back to the elementary school, pick up, whatever. That would've been just a pain. I think our customers look at their employees and they think, "Okay, how do we ... because employee experience is huge. I mean, down to tracking mileage. We know that there's a specific way in which that all has to be documented, and we know technology enables that, but at the same time what if that means such a relief to the employee, right? They don't have to be the ones to have to track that. The technology serves up all of the appropriate reimbursement and manages it for them. That's the part that we also need to make sure we're balancing, to your point. The financial aspect is important. There's a lot of dollars.

Marchelle Klippenstein:

Like you said, it's probably the top 10 expense category in most people's programs, but at the same time you've got this balance of employees that need them to be doing the job. You need them to be driving without being on their mobile device trying to enter in their miles. Think about the safety risks that go with things like that, right? I don't know, is that a conversation you've had with some customers around safety risk? If the technology just enables the tracking, do we have a safety win on that front?

Ken Robinson:

Absolutely. So there was a productivity issue too that creeps in here, Marchelle. We've looked at some of this in terms of trying to quantify what the value of having a set it and forget it approach to mileage versus having someone really try and rationalize their mileage as they fill out their expense report and then type a number in. The value there and particularly when you're talking about the documentation or substantiation requirements that are outlined in the IRS tax code, I would say ... I can make it really short actually. It's about 21 hours a year that are saved per employee if-

Marchelle Klippenstein:

21 hours?

Ken Robinson:

Right.

Marchelle Klippenstein:

Wow.

Ken Robinson:

Right. So someone that I would say is a frequent business driver, right, so someone that probably drives at least 5,000 business miles a year. That's going to equate to at least 21 hours of manual log time, either in a spreadsheet, or in your notebook or in some kind of clunky app where you're doing a half measure and it's a huge productivity gain.

Marchelle Klippenstein:

But then also I can't help but think, does that actually bring another company, another outcome to the table, which would be almost like ... I mean, if an employee gets lost, or something happens to the employee driving or there's the GPS component, but also so we would know where the employee was, but then also what about any sort of insurance or further financial loss to an organization? Any scenarios to consider there that Motus as a technology could help prevent or support to companies' mobility policy around?

Ken Robinson:

Yes, we take driver's safety very seriously, and I've done different work, and I'm up to speed on some of the latest studies just about the impact. So vehicle accidents, so one of the things that really I guess the business leaders don't think about necessarily is that anytime whether an accident happens during work hours or not during work hours that's going to affect productivity across their teams, right? Even if there's no injury involved, if someone has to go to traffic court and take time off of work then productivity is being affected there. And so that time can add up pretty significantly, and obviously just good, safe driving is important too, right? Nobody wants anybody else to get hurt. And there's those two elements of it and, like I said, it's highly preventable. And sometimes what I've found is that it's a high priority, but it's not always a high enough priority to take action, right, and make driver safety a real front and center priority for people that are driving for business.

Ken Robinson:

Even, gosh, yesterday I was reading about the challenge that faces businesses between how engaged do you want your employees to be while they're on the road? Some companies are taking a stance where they want employees to be able to participate in at least conference calls, and other types of sort of like half attention business activity. They think that's super important and so they won't implement a policy that's phone off while you're driving. Well, I guess some companies have ... They'll require a car mode on the phone or things like that.

Ken Robinson:

But then when it gets back just to that infotainment system in the car it's something that people are thinking about but they haven't totally resolved yet, because people can be looking at their navigation or adjusting the environmental controls of the car and it's all those different things. But the other challenge is that people don't all have the same risky driving profile of behaviors. The Motus perspective is that the best approach is an individualized approach, to assess each person's strengths and weaknesses and then help them improve on their weaknesses. And so that's kind of our approach to making drivers safer.

Marchelle Klippenstein:

No, I like that. I mean, I think most wouldn't necessarily correlate mileage reimbursement to driver safety, but I think through the technology and through just really looking at it holistically, it's more than just a mileage reimbursement program. It is actually a mobile workforce system, right, or support for them and mileage tracking or that reimbursement element is just a piece of it. I think our customers need to know that it's a chunky piece of their program that they have to make sure that they're looking at, like the next version of this given us coming out of this pandemic, getting airfare ... I live in Washington, like we were talking about earlier, and if I could drive to Oregon to meet a customer I'm going to do that probably than get on a plane. I'm going to drive at least minimum or max would be maybe three and a half hour drive. I'm fine with that. I'd rather do that than take an airplane because me going to the airport, plus getting on the plane, plus departing or arriving and dealing with all of my luggage, that's still three and a half plus hours there. So I'm going to weigh those benefits. I'm going to choose to drive probably.

Marchelle Klippenstein:

So, our customers have to think of like, what's next? Which, it's the opportune time. I don't know, I think I've had this discussion with a couple of my team members and thinking about what's the market pressure? Everybody's in this readdressed stage right now and I think mileage is just one piece of that that needs to be re-looked at, right?

Ken Robinson:

Yeah, totally agree. Well and especially because I think it's important that people think about that assessment now, because otherwise there's this risk that the spend is going to grow underneath that top level visibility because people aren't looking for it. If you're going to allow people to expense the whole bill and it's something that's a mixed-use asset then you're overpaying at the end of the day as a financial team. So the problem is that this is short-term thinking, right? To generalize, of course, people were thinking that they were going to lock down for five weeks and then get back out. And so they put all these short-term measures in place that I'm very confident persist.

Ken Robinson:

And so that's the thing is that it especially gets washed out when you think about how T&E is ... If somebody's looking at T&E on a balance sheet or business travel, those expenses are hiding under that plunge in business travel expenses from last year. And so now as we start layering it back in costs are going to go up because until someone does something about some sort of approach to resolve that expensing of the whole bill.

Marchelle Klippenstein:

It's new behavior. It's new expectations that the employees now have that the reimbursement factor is going to just always be there. I mean, overall it's just policy reset or program design for specific outcome, specific budgetary control. Our customers are going to have to come back into that old. They can't just now expect that, okay, well, we're going to grant home office everything. It's going to change. And so I agree with you on that front.

Marchelle Klippenstein:

I think that the mileage topic is a huge piece of that and I really appreciate your perspective on this, Ken. You're clearly an expert and I know our customers obviously look at this and are trying to figure all these pieces out, and the partnership with Motus is extremely valuable, I know that. Well Ken, thank you again for your time and hopefully the listeners got a sense of the well-roundedness of this topic. I think it's a top expense line item. There's a lot of money involved and there's lot of employee experience to consider. The world is opening back up and Concur and Motus are here to support our customers. Thank you.

Ken Robinson:

Thank you, Marchelle.

Marchelle Klippenstein:

You're welcome.

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Learn more about how to optimize mileage spend for your organization through the SAP Concur FAVR by Motus partnership by contacting your account representative today!

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